Oil Futures Hit Nine-Month High on Iraq Violence

Government Troops Abandon Positions in Northern Province

U.S. oil prices jumped to their highest point since September on Thursday as the government in oil-producing Iraq continues to lose cities in a growing sectarian conflict.

Light, sweet crude for July delivery rose $1.72, or 1.7%, to $106.12 a barrel on the New York Mercantile Exchange. It is the second largest day of gains, measured by percentage, in two months.

Brent crude on ICE Futures Europe rose $1.95, or 1.8%, to $111.90 a barrel. It is Brent's largest one-day percentage gain since March 3.

The conflict in Iraq has happened at probably the worst possible time for the oil markets, said John Kilduff, a partner at Again Capital in New York. Prices have already been rising because U.S. production, while high, hasn't been enough to overcome a tight global market, he said. There have been outages and geopolitical conflicts in several of the world's oil-producing regions this year.

"It's been what I call a round robin of oil outages," said Mr. Kilduff, whose firm invests in energy commodities. "Iraq had been a bright spot. (Now) that hangs in the balance and that's a lot of oil that can't really be made up by anybody else at this point."

Iraq has pumped out about 3.5 million barrels of oil a day this year. Much of that comes from the south, away from the conflict with sectarian militants, but there is increasing concern that the conflict could spread and that the Iraqi government is losing control, analysts said.

Iraq Oil Minister Abdul Kareem Luaiby, speaking at a meeting of the Organization of the Petroleum Exporting Countries in Vienna on Wednesday, described Iraq's southern oil-producing sites that include the export terminal at Basra as "very, very safe."

The regional Kurdish military on Thursday took control of the northern provincial capital Kirkuk, filling in after it was abandoned by the central government, according to the provincial governor's office. The central government was trying to resist militants who had overrun Tikrit the day before, claiming it had retaken most of that city, just 112 miles from the capital, Baghdad.

If the threat to Baghdad grows, it could send global oil prices up $5 to $10 a barrel, Mr. Kilduff said. He estimates that would push up gasoline prices 10 to 30 cents a gallon this summer.

Front-month July reformulated gasoline blendstock, or RBOB, recently rose 4.32 cents, or 1.4%, to $3.0440 a gallon. July diesel recently rose 5.03 cents, or 1.7%, to $2.9546 a gallon.

Corrections & Amplifications Light, sweet crude for July delivery rose $1.72, not 17.2 cents, to $106.12 a barrel on the New York Mercantile Exchange, while Brent crude on ICE Futures Europe rose $1.95, not 19.5 cents, to $111.90 a barrel. An earlier version of this article misstated the amount by which prices moved.